LCCI Commends NNPC on oil sector reforms
*No oil producing country imports refined petroleum products on a scale we do in Nigeria- Says Muda Yusuf
By Udeme Clement :
“The decision by NNPC to put an end to subsidy/under recovery regime is a welcome development. It will be a game changer for oil and gas sector and the economy as a whole”, said, Director General, Lagos Chamber of Commerce and Industry, Dr Muda Yusuf.
“He added, “The impact on the economy would be invaluable. However, it is vital to ensure that this new policy will be entrenched, so that there will be no contemplation of any form of reversal. We are aware that similar attempts to undertake this crucial reform in the past had not been successful.”
He enthused, “However, we are confident that in the current dispensation, this will not be the case.”
He went on, “Meanwhile, we request that urgent steps be taken to consummate the reform process with an appropriate legislative framework. Such a legislative review would reconcile the initiative with some extant laws.
“Examples of such legislations are those setting up the Petroleum Subsidy Fund (PSF), the Petroleum Product Pricing and Regulatory Agency [PPPRA] and the Petroleum Equalization Fund [PEF].”
He emphasised, “It is imperative to ensure clarity on access to foreign exchange for petroleum marketers to import products. Operators who are currently in a quandary on this matter are eagerly awaiting guidelines from the Central Bank of Nigeria, on this critical aspect of access to forex for importation of petroleum products.
“The Chamber commends NNPC’s pronouncement on the future involvement of private sector in operation of the countries moribund refineries. This is another laudable initiative, which will ensure that these national assets are put to use for the growth and development of our economy.
“One of the critical elements of the Oil and Gas Sector reforms, particularly the downstream sector, is the complete deregulation of the sector. This was the spirit of the Petroleum Industry Bill, which regrettably, has got stuck in the legislative processes for close to two decades”.
He stressed,. “The reform of the downstream oil and gas sector would create a number of advantages for the economy.
“It will free resources for investment in critical infrastructures such as power, roads, the rail systems, health sector and education sector. The deficit in all of these infrastructure areas are phenomenal. Fixing infrastructure will greatly improve productivity and efficiency in the economy and impact positively on the welfare of people.
It will unlock the huge private investment potentials in the downstream oil sector, especially in petroleum product refining. This will ultimately reduce importation of petroleum products and ease pressure on foreign exchange market, as well as the burden on our foreign reserves.
“It will eliminate patronage, rent seeking activities and corruption that currently characterise the downstream oil sector.
It will create more jobs for the teeming youths of the country in the downstream oil sector as investment in the sector improves.
“The investment opportunities in our Oil and Gas sector are huge, considering our crude oil reserves and the even bigger prospects in respect of our gas reserves.”
He pointed out, “We have a population now estimated at close to 200 million people. That is a big domestic market for energy, presenting huge opportunities for the downstream investments.
“We have a strong competitive advantage in oil and gas.
The abundance of investment opportunities is not in dispute but investors are constrained by policy, governance and political environment. These have slowed down the pace of development in the sector. Nigeria has been in the business of oil for over 50 years, but we don’t have any private refineries operating on a commercial scale”.
His assertions, “This is a big issue. No oil producing country imports refined petroleum products on a scale that we do in Nigeria. It is inexcusable.
“Pipelines are very critical infrastructure for refineries and for the sector but the current pipelines have deteriorated due to poor investment and maintenance.
“Again, this is because the pipelines are in public sector space. The story of petrochemicals and fertiliser plants are not different, although the latter has witnessed some measure of privatisation.
“The dominance of public sector in this space has significantly slowed down the progress and development of the oil and gas sector. The sector is so strategic that it could easily have provided the lever to accelerate diversification of Nigeria’s economy.’